[jeff]

I’ve had a few requests for April/May Study Groups…March will be here before you know it.

In order to take an early April exam, you should begin studying…now. 🙂

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[jrosen92770]

Purchase returns and allowances, according to the rules on F4-63, are reductions of both cost and retail. Sales returns only impact sales, which I am assuming is only associated with the retail side of the equation.

BEC - 5/26/2013 75
REG - 8/31/2013 82
AUD - 11/24/2013 74, 2/9/2014 92
FAR - 5/25/2014 85

NY CPA

[jrosen92770]

Fireworks, Inc. had an explosion in its plant that destroyed most of its inventory. Its records show that beginning inventory was $40,000. Fireworks made purchases of $480,000 and sales of $620,000 during the year. Its normal gross profit percentage is 25%. It can sell some of its damaged inventory for $5,000. The insurance company will reimburse Fireworks for 70% of its loss. What amount should Fireworks report as loss from the explosion?

a.

$35,000

b.

$15,000

c.

$50,000

d.

$18,000

BEC - 5/26/2013 75
REG - 8/31/2013 82
AUD - 11/24/2013 74, 2/9/2014 92
FAR - 5/25/2014 85

NY CPA

[stoleway]

On April 1, Aloe, Inc., factored $80,000 of its accounts receivable without recourse. The factor retained 10% of the accounts receivable as an allowance for sales returns and charged a 5% commission on the gross amount of the factored receivables. What amount of cash did Aloe receive from the factored receivables?

A. $72,000

B. $68,000

C. $76,000

D. $68,400

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[rvcpa]

Jrosen and Stoleaway- B on both.

[stoleway]

@jro…..$15,000

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[SpartanCPA]

B. $68,000

AUD - 01/18/14 - 81
BEC - 05/29/14 - 85
FAR - 07/18/14 - 81
REG - 11/18/14 - 80

Becker CPA Review
NINJA Audio
Michigan State University

[stoleway]

correct on B

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[jrosen92770]

$15k is correct.

BEC - 5/26/2013 75
REG - 8/31/2013 82
AUD - 11/24/2013 74, 2/9/2014 92
FAR - 5/25/2014 85

NY CPA

[rvcpa]

Young & Jamison's modified cash-basis financial statements indicate cash paid for operating expenses of $150,000, end-of-year prepaid expenses of $15,000, and accrued liabilities of $25,000. At the beginning of the year, Young & Jamison had prepaid expenses of $10,000, while accrued liabilities were $5,000. If cash paid for operating expenses

[jrosen92770]

$175k

BEC - 5/26/2013 75
REG - 8/31/2013 82
AUD - 11/24/2013 74, 2/9/2014 92
FAR - 5/25/2014 85

NY CPA

[rvcpa]

$165,000

---

During the year, prepaid expenses increased $5,000 from $10,000 to $15,000. Prepaid expenses represent assets where no benefit has been received yet. In accrual accounting, they are not officially expenses until there is associated benefit. Therefore, the $5,000 needs to be subtracted from $150,000. Also during the year, accrued liabilities increased from $5,000 to $25,000. This represents benefit received but no cash paid out yet. The expense of $20,000 (representing the increase) should be booked now (which creates the liability), and when cash payment is made, the liability will be removed. Given the starting point of $150,000, subtracting $5,000 and adding $20,000 will bring accrued expenses to $165,000.

[SpartanCPA]

@jrosen just want to post how I calculate the answer for my own peace of mind 🙂

COGS = $620,000 * .75 = $465,000

Beg. inventory = $40,000

+ Purchases = $480,000

– COGS = $465,000

Ending inventory = $55,000

Can sell damaged inventory for $5,000 –> $55,000 – $5,000 = $50,000

70% is reimbursed –> $50,000 * .70 = $35,000

Loss from explosion = $50,000 – $35,000 = $15,000

AUD - 01/18/14 - 81
BEC - 05/29/14 - 85
FAR - 07/18/14 - 81
REG - 11/18/14 - 80

Becker CPA Review
NINJA Audio
Michigan State University

[jrosen92770]

Working on questions for conventional retail inventory method, yuck!

BEC - 5/26/2013 75
REG - 8/31/2013 82
AUD - 11/24/2013 74, 2/9/2014 92
FAR - 5/25/2014 85

NY CPA

[SpartanCPA]

On its December 31, Year 2, balance sheet, Shin Co. had income taxes payable of $13,000 and a current deferred tax asset of $20,000 before determining the need for a valuation account. Shin had reported a current deferred tax asset of $15,000 at December 31, Year 1. No estimated tax payments were made during Year 2. At December 31, Year 2, Shin determined that it was more likely than not that 10% of the deferred tax asset would not be realized. In its Year 2 income statement, what amount should Shin report as total income tax expense?

AUD - 01/18/14 - 81
BEC - 05/29/14 - 85
FAR - 07/18/14 - 81
REG - 11/18/14 - 80

Becker CPA Review
NINJA Audio
Michigan State University

[stoleway]

@SpartanCPA

$10,000?

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[Author]

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